Following a ruling by the D.C. Circuit, EPA may no longer consider interrelatedness in determining adjacency when making source determination decisions in its Title V or New Source Review permitting decisions under the Clean Air Act. The decision, which vacates EPA’s policy directive Applicability of the Summit Decision to EPA Title V and NSR Source Determinations (Dec. 21, 2012) (the “Summit Directive”), is National Environmental Development Association’s Clean Air Project v. EPA, No. 13-1035 (D.C. Cir. May 30, 2014). The ruling is significant to the oil and gas industry because EPA has been trying to aggregate well fields and processing facilities together for permitting purposes.

Pursuant to EPA’s Clean Air Act regulations, multiple pollutant-emitting facilities are considered to be a single stationary source if they are, among other things, “adjacent.” See 40 C.F.R. §§ 71.2, 52.21(b)(5)-(6). EPA made adjacency determinations based not only on the physical distance between two or more facilities, but also on the functional interrelationships of the facilities. This policy was rejected by the Sixth Circuit in Summit Petroleum Corp. v. EPA, 690 F.3d 733 (6th Cir. 2012), which held that a natural gas plant and associated wells could not be considered one source under Title V purely based on functional relatedness.

In response to the Sixth Circuit’s ruling, EPA issued the Summit Directive, stating that it would not follow the Sixth Circuit’s ruling in states outside the Sixth Circuit’s jurisdiction. The Summit Directive was subsequently challenged in the D.C. Circuit, where the Petitioner argued EPA put facilities outside of the Sixth Circuit at a competitive disadvantage by establishing inconsistent permit criteria applicable to different parts of the country. The EPA argued that neither the Clean Air Act nor EPA regulations require it to ensure national uniformity in response to a judicial decision.

The D.C. Circuit vacated the Summit Directive. In doing so, the court did not reach the question of “whether the [Clean Air Act] allows EPA to adopt different standards in different circuits” because it was clear that EPA’s own regulations – specifically, its “Regional Consistency” rule – require such uniformity. This rule states that EPA’s policy is to “[a]ssure fair and uniform application by all Regional Offices of the criteria, procedures, and policies employed in implementing and enforcing the act” and to “[p]rovide mechanisms for identifying and correcting inconsistencies by standardizing criteria, procedures, and policies being employed by Regional Office employees.” 40 C.F.R. § 56.3(a), (b). The D.C. Circuit found that by issuing the Summit Directive, the EPA clearly violated its Regional Consistency rule, stating that “EPA was obligated to respond to the Summit Petroleum decision in a manner that eliminated regional inconsistency, not preserved it.”

The D.C. Circuit did not address whether EPA could properly aggregate emissions from multiple facilities. In fact, the court suggested that EPA could revise its regulations to allow for such aggregation. Until EPA revises or replaces its Regional Consistency rule, however, EPA is precluded from considering multiple facilities to be a single source based solely on functional interrelatedness.

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The North America Shale Blog is presented by members of BakerHostetler’s Energy and Shale team. BakerHostetler has a rich tradition serving clients in the energy industry, offering comprehensive services from our offices nationwide.

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About this Blog

The North America Shale Blog is presented by members of BakerHostetler’s Shale Team. BakerHostetler has a rich tradition serving clients in the energy industry, offering comprehensive services from our offices nationwide.